Bond Risk Decreases in Asia, Credit Default Swap Prices Show

The cost of insuring corporate and sovereign bonds in Asia from non-payment decreased, according to traders of credit default swaps.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan fell 2 basis points to 134 basis points as of 8:21 a.m. in Singapore, Australia & New Zealand Banking Group Ltd. prices show. The measure is poised to drop 2.2 basis points this week, the most since the five days ended Oct. 18, according to data provider CMA.

The Markit iTraxx Japan index declined 2 basis points to 85.75 as of 9.22 a.m. in Tokyo, Citigroup Inc. prices show. The benchmark is set for an 8.75 basis-point fall this week, the most since the five days ended July 12, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the private market.

The Markit iTraxx Australia index rose 0.5 of a basis point to 103.5 basis points as of 11:44 a.m. in Sydney, according to Westpac Banking Corp prices.

Credit-default swap indexes are benchmarks for insuring bonds against default and traders use them to speculate on credit quality. A drop signals improving perceptions of creditworthiness, while an increase suggests the opposite.

The swap contracts pay the buyer face value in exchange for the underlying securities if a borrower fails to meet its debt agreements.

To contact the reporter on this story: Finbarr Flynn in Tokyo at fflynn3@bloomberg.net

To contact the editor responsible for this story: Katrina Nicholas at knicholas2@bloomberg.net

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